Gamefly: USPS handles DVD rentals with kid gloves, ignores us

Gamefly has filed a complaint with the Postal Regulatory Commission accusing …

Gamefly is a popular way for gamers to play titles without having to buy $50 or $60 games. It works just like any mail-based rental service: you subscribe, choose the number of games you'd like to rent each month, keep them from however long you'd like, and then send them back once you're done. When Gamefly receives the games, it mails out the next one on the list. According to a recent complaint filed by Gamefly against the Postal Regulatory Commission however, mailing games remains dangerous, and expensive. That is, unless you're Netflix or Blockbuster.

According to Gamefly's numbers, it mails out 590,000 games and receives 510,000 games back from subscribers a month. The company sees, depending on the mailer, between one and two percent of its games broken in transit. "Testing by GameFly and Postal Service personnel has revealed that breakage occurs during the processing of DVD mailers on Postal Service automated mail processing equipment," Gamefly states.

Even if you assume the number is one percent, and a game costs $50 to replace, that's an astounding $295,000 a month in lost merchandise. As the company grows—and the complaint claims 34 percent yearly growth—that number will only get grow with it.

That's not the only issue— games are also stolen in transit, which has lead to the arrest of 19 Postal Service employees.

After testing multiple solutions, Gamefly saw the best results with a protective insert in the standard-sized mailer, which made the cost of shipping approximately double. Did that help? "...the Postal Service failed to stop breaking GameFly DVDs despite collecting the higher rates charged for flat-shaped First-Class Mail, and even after GameFly began marking its mailers with warnings such as 'FIRST-CLASS MAIL FLAT' and 'PROCESS ON AFSM-100,' the complaint alleges.

Netflix, Blockbuster given better treatment?

While some amount of theft and breakage is to be expected, Gamefly claims it has tried working with the Post Office to reduce the problems, to no avail. Further, the "solutions" still lead to broken discs, even with a significant increase in the cost of postage. Gamefly claims that mailers from Netflix and Blockbuster are treated better than their own product.

"On routine visits to multiple Postal Service facilities, GameFly’s employees have observed that a large percentage of mail pieces from Netflix and Blockbuster are culled from the automated letter processing stream," the complaint states. "GameFly has asked the Postal Service to give GameFly’s DVD mailers processing on terms and conditions comparable to the terms and conditions offered to two larger DVD mailers, Blockbuster and Netflix. The Postal Service has not done so."

Now that Blockbuster has began to offer video games for rental through its mailing service, a large problem has been created for Gamefly. "As a result of this initiative, GameFly now faces direct competition from a rival that is larger and longer established and which, because of the preferential treatment given by the Postal Service, enjoys a substantial cost advantage in the distribution of its DVDs to consumers."

Another success story for the US Postal Service?

Gamefly's complaints are pretty basic: its mailers aren't given the same preferential treatment as its competitors, and it pays for flat-rate postage, but the mailers aren't sorted on the correct equipment, leading to breakage. USPS employees steal the games. The complaint details every attempt the company has made to work with the Postal Service to resolve these complaints, or to get the same treatment given to Netflix and Blockbuster, and it claims those attempts have lead nowhere.

What's even more galling is that the Postal Service sent out a press release when Gamefly opened its new distribution center in Austin Texas, touting the use of the mail to help businesses grow. "GameFly may be a relatively new company, but it's using an old idea; getting USPS to help it grow," the release stated. "Company founders modeled the video game rental company on Netflix, the movie rental-by-mail mogul."

Gamefly says "movie rental-by-mail moguls" are getting better treatment. We've contacted both Gamefly and the United States Postal Service for comment on the complaint, but have yet to receive a reply. We'll update when we hear back from them.

54 Reader Comments

There's a reason the Post Office is losing money faster than Chrysler and GameFly's complaint is a prime example. Anyone who has sent packages via USPS knows that luck plays a large part in your package's safe arrival.

I have received netflix envelopes that have been opened and resealed. I think the stealing part happens more than we know. I think it's probably a good thing that I only rent shitty sci-fi and foreign movies.

Still, this sounds pretty shitty from the USPS. I'd love to hear them respond...

Chicago is notorious for its sketchy USPS service, and I don't think Netflix is getting much of a preferential treatment here. I've gotten two broken DVDs in the last year, which is the same amount I'd gotten the 5 years previous from Netflix. Also, the envelopes often arrive ripped to the point they can't be used for return shipment.

Chicago is notorious for its sketchy USPS service, and I don't think Netflix is getting much of a preferential treatment here. I've gotten two broken DVDs in the last year, which is the same amount I'd gotten the 5 years previous from Netflix. Also, the envelopes often arrive ripped to the point they can't be used for return shipment.

odd.

here (louisville, ky) all my netflix/gamefly stuff has been fine. now the discs may be eaten to hell and back, but the actual package is fine.

there's shitty employees everywhere. i don't know if i'd put all the blame on the USPS. i wouldn't blame all of McDonalds for a shitty fry cook, just that local site.

Even if you assume the number is one percent, and a game costs $50 to replace, that's an astounding $295,000 a month in lost merchandise.

If they're paying $50 to replace a game, that would seem to be the obvious low-hanging fruit to fix. The actual physical product of a video game is pretty trivial. You're buying a license for the game, as EULAs love to remind us. They just need to get an agreement with game manufacturers to let them replace broken discs at near-cost.

Of course, if the publishers don't play ball, that might be kind of hard. Maybe they should start buying from Gamestop and making use of the $1 disc insurance? (joking... mostly) Some publishers also have a disc replacement policy; you usually pay something, but it's a lot cheaper than re-buying the game.

But, to go back to the "if you assume" part, it might be worth trying to ascertain if Gamefly is actually paying full retail for replacement discs before we start guessing on the numbers.

quote:

As the company grows—and the complaint claims 34 percent yearly growth—that number will only get grow with it.

Which isn't really as scary as it sounds unless they're losing money per customer. After all, growth brings more subscriptions too. Since the cost to replace discs is side-by-side with other costs that don't grow per-customer, more people alongside more disc breakage still probably gives them a higher profit margin.

Not that this means it's not a waste or a problem; just that the fact that the cost will grow as the company does doesn't make the problem get scarier too.

there's shitty employees everywhere. i don't know if i'd put all the blame on the USPS. i wouldn't blame all of McDonalds for a shitty fry cook, just that local site.

But you can blame them if you complain, send people to help fix the problem, agree to pay more for your fries (or mail) and see no improvement. Which is what the story alleges. I too am interested in seeing what the USPS says in response.

I used to live in Chicago and had 2-3 Gamefly discs disappear before they ever showed up. Maybe if they didn't use a bright orange sleeve wrapper and mailed the games in a plain discreet envelope there would be less leakage.

Actually, I find the USPS service to be amazing. To move the amount of mail that they do to some of the most remote spots, on a daily basis, for some low postal rates, with the success rate that they have is really something. A big portion of my early career was shipping time critical large items through FedEx, UPS, DHL, etc. And boy, they blew it from time to time.

Back to the OP ... I wonder how NetFlix and BB get prefential treatment? It would almost need to be solely at their initial drop off/return point(s). Once the items get dispersed into the system I cannot see how they would carry the "kid gloves star" through additional sorting and other post offices if they are shipped under the same designation. Perhaps mail carriers hate games? GameFly's initial drop off point is really bad? Games based disks are not as sturdy as movie disks (a stretch, I know)? It just doesn't make sense that the USPS would have a reason to give preferential treatment to anyone unless paid to do so. FWIW, Netflix has lighting fast service in my area; a day out and a day back. GameFly is like molassas in comparison. I wonder if Netflix/BB just know how to do it better?

Last week I got back to back broken copies of Spinal Tap from Netflix. They were both cracked all the way from the edge to the center hole. I was wondering if Netflix was just repacking the same disc. Yesterday I received one that wasn't cracked but is scratched pretty badly. I haven't tried to play it yet though.

Sometimes I wonder if it wouldn't be cheaper for Netflix to use a heavier package such as cardboard or slim CD jewel cases.

That said, I must use USPS to have things shipped to my house. UPS and FedEx both refuse to update their map programs. FedEx at least tried to find our house, UPS just immediately sends a thing in the mail saying our address must be wrong since they can't find it via their GPS setup (must be using Google's since they put me in NY, not PA).

I have generally had good luck with the USPS, but sometimes they are bad. Just ask a couple of the people I have transacted with in the Agora. You can pack something to survive a tank running over it and it will still somehow get smashed up. It happens, but USPS tends to make getting your money back on insured items a serious PITA.

I think Netflix completely changed the rental business. There's no late fees and there's no going to the movie store to throw a bitch-fit about losing a movie or having to pay late fees. I have a friend who turned his whole house upside down to find a netflix dvd and finally he went online to see how to report it. He ended up reporting it lost in the mail and he had his next movie in just a few days with no questions asked. Yes, discs are broken and lost by the post office but how many of those discs are simply reported broken or lost just so the customer doesnt have to pay for the game? If this happened with a rental store, you'd have to go into witness protection just to get away from fees.

The are some major reasons why Netflix has a different USPS experience than Gamefly.

Netflix employs many former USPS workers to advise and consult. These people are paid well to help Netflix remove "problems" from the processing system. Netflix also operates its own fleet of trucks who go to the main post office branches in most areas and pickup the Netflix mailers so the USPS only has to do minimal work. Literally all they do is collect the mailers and Netflix does the rest. Anything that takes the load off USPS workers, anything that makes their lives easier, they like. They remember. This also increases profits for the PS because they still get paid the same price per mailpiece even if Netflix is picking up the mailers halfway through the processing.

Gamefly is not doing these things. Gamefly does not send out trucks to all the major mail processing centers because Gamefly doesn't have facilities all over the US like Netflix. Gamefly is apparently not employing USPS workers to assists and advise and easy processing, for whatever reason. Instead of doing those things, Gamefly simply wants "fair treatment" without understanding you don't get that for free with the USPS. There needs to be some "appreciation" of the hard work and effort being made by the USPS.

One other thing you never do is piss off the USPS. If you do that, if you cause them to have to work harder, and you are a big mailer like this, bad things start happening to your mail.

Some publishers also have a disc replacement policy; you usually pay something, but it's a lot cheaper than re-buying the game.

True, but I seriously doubt they would do that since the game rental and used game markets are borderline piracy to many of them when it comes eating into software sales. You know that has to be part of the motivation for Patapon 2 being digital only.

Not sure if it's the USPS or Gamefly's fault but I just canceled my Gamefuly Subscription because it would take on average 7 days to go from the mailbox and back to my house. never less then 6 days, never more then 8. I used the service for over 2 years and was hoping they'd improve so that I would get better value. Didn't happen even after they opened more warehouses in the south and out east. Why not the midwest? Must be because we're "fly over' land.

I never had a problem with lost or damaged media from Gamefly but I have from Netflix.

I work in a direct mail company and trust me you have no idea how incompetent some of the postal employees are. Don't get me wrong some of them are great and i wonder why they work at the post office, but some of them are ridiculous. The sorting on the wrong equipment doesn't surprise me in the least bit.

Having worked in a medium sized processing and distribution center for a national organization of unspecified nature for several years now, I can easily see how this happens. Somehow, senior management sees a customer as small fish, even though they make up a sizeable chunk of steady revenue, and the priorities go askew. And because someone in marketing, senior management, manufacturing, or any combination thereof has built a rapport with representatives from the competing customers, the “small fish” never make it to big pond status—no matter how much they complain and work to solve their issues.

It’s not supposed to happen. Officially, it never does. But when you run the numbers and observe the process, you see what really goes on—and sometimes you’re shocked. Where 0.03% - 0.10% failure rate is hell unleashed for some customers, 1% - 3% failure rate is somehow acceptable.

And it can really be as simple as prioritizing the equipment for preferred customers.

Originally posted by Delor:If they're paying $50 to replace a game, that would seem to be the obvious low-hanging fruit to fix. The actual physical product of a video game is pretty trivial. You're buying a license for the game, as EULAs love to remind us. They just need to get an agreement with game manufacturers to let them replace broken discs at near-cost.

Of course, if the publishers don't play ball, that might be kind of hard. (...) Some publishers also have a disc replacement policy; you usually pay something, but it's a lot cheaper than re-buying the game.

In most countries outside the US, rental shops must pay a significant premium for "rental versions" of their movies and games. And the only benefit they used to get (besides rental rights) was maybe getting the movies a bit early (used to be months early, but not any more). Besides in many such countries, most games (and many DVDs) simply don't make it to the rental market at all (it's left at the publisher's whim).

So, all in all, I don't think Gamefly is getting that bad a deal, and seriously doubt the gaming industry would ever consider giving them "free" replacements.

AFAIK, you have your "first sale doctrine" to thank for the success of ventures like Netflix and Gamefly.

Originally posted by bryansj:I doubt Gamefly pays $50 to $60 per game. I would assume they would get them at least at reseller cost.

The complaint says they pay up to $50, which I think is the reseller price for games that retail at $60.

I would have assumed that Gamefly probably pays considerably more than the reseller price since they are not actually reselling, but renting. Every rental is potentially a lost retail sale and once the game has been rented enough times, Gamefly has made up the extra cost.AFAIK, rental version of DVDs are considerably more expensive than the version you buy in the store, but maybe that isn't the case anymore. Same for library books. I don't think they get them at retail prices.

This is a clear example of a violation mail-neutrality. We need to push for legislation here, I don't want to wait for more examples like this to surface. We're on a slippery slope here. WE MUST enact legislation NOW to force the post office to "blindly" handle all mail the same way.

It would clearly be better if they started breaking just as many NetFlix and Blockbuster disks. Clearly better if firms such as NetFlix and Blockbuster were NOT ALLOWED to work with/finance the USPS to resolve issues. It doesn't matter that such learnings will, almost assuredly, end up trickling down and helping out folks like GameFly. In the INTERIM, those scumbag companies are getting an advantage by educating themselves and the USPS, using their financial resources, etc, which is downright un-American.

Oh yeah, and remove all postage options except for the bulk rate. Why should my newsletter have to compete with a magazine willing/capable of paying for a better postal service? Totally not fair.

Originally posted by scottywrx:I used to live in Chicago and had 2-3 Gamefly discs disappear before they ever showed up. Maybe if they didn't use a bright orange sleeve wrapper and mailed the games in a plain discreet envelope there would be less leakage.

I recently left Chicago, but in the years I lived there, I had lots of problems with Gamefly discs never making it to me as well. Lo and behold, I get a letter in the mail from the US DOJ, and I was a victim of mail theft by USPS employees in Chicago.

If you don't get your discs, please go through and report it to the USPS as Gamefly asks, mail theft by USPS employees does happen, sadly.

Originally posted by max4677: It happens, but USPS tends to make getting your money back on insured items a serious PITA.

I have filed insurance claims with USPS several times in the past couple years, and every single time I received a check fairly quickly. As long as you have all the documentation required (and if you buy your postage online, it's really simple), the process is very straightforward.

Originally posted by netchipguy:This is a clear example of a violation mail-neutrality. We need to push for legislation here, I don't want to wait for more examples like this to surface. We're on a slippery slope here. WE MUST enact legislation NOW to force the post office to "blindly" handle all mail the same way.

It would clearly be better if they started breaking just as many NetFlix and Blockbuster disks. Clearly better if firms such as NetFlix and Blockbuster were NOT ALLOWED to work with/finance the USPS to resolve issues. It doesn't matter that such learnings will, almost assuredly, end up trickling down and helping out folks like GameFly. In the INTERIM, those scumbag companies are getting an advantage by educating themselves and the USPS, using their financial resources, etc, which is downright un-American.

Oh yeah, and remove all postage options except for the bulk rate. Why should my newsletter have to compete with a magazine willing/capable of paying for a better postal service? Totally not fair.

Originally posted by netchipguy:This is a clear example of a violation mail-neutrality. We need to push for legislation here, I don't want to wait for more examples like this to surface. We're on a slippery slope here. WE MUST enact legislation NOW to force the post office to "blindly" handle all mail the same way.

It would clearly be better if they started breaking just as many NetFlix and Blockbuster disks. Clearly better if firms such as NetFlix and Blockbuster were NOT ALLOWED to work with/finance the USPS to resolve issues. It doesn't matter that such learnings will, almost assuredly, end up trickling down and helping out folks like GameFly. In the INTERIM, those scumbag companies are getting an advantage by educating themselves and the USPS, using their financial resources, etc, which is downright un-American.

Oh yeah, and remove all postage options except for the bulk rate. Why should my newsletter have to compete with a magazine willing/capable of paying for a better postal service? Totally not fair.

-netchipguy

Ladies and gentlemen, I give you: The Amazing Strawman!

No kidding, right?

Let’s just forget the fact that the USPS provides no content of its own, so it cannot give itself a competitive advantage over content providers. Let’s forget other things, too, like the fact that gamefly’s complaint involves broken product, not a distribution time problem, and so on and so forth..

As the company grows—and the complaint claims 34 percent yearly growth—that number will only get grow with it.

Another fine bit of editing (not!) on Ars...

Other than what others above have stated, I can't help but think it is largely a matter of big fish/small fish, where GameFly is the small fish, and thus they simply aren't going to be able to demand as good of bulk rates as Blockbuster and NetFlix can currently demand. Because the other two are shipping so many discs in comparison, it is both cheaper for them, as well as being a lower profit margin for the USPS: helps the companies, but makes it even less of a good thing for the USPS for losses to occur, so perhaps there's some strong influence there. Having not used either NetFlix or Blockbuster for mailing stuff (I never know ahead of time what I'm wanting to watch, so a mail order solution just isn't worthwhile) I have no experience with them. If GameFly started insuring all their titles, I wonder if the USPS would start deciding it isn't worth it to allow stealing and breaking from their employees, or if they've chosen to make the costs of the insurance premiums high enough as they are to still make a profit from it with GameFly's current rate of problems.

Originally posted by Starway:Netflix employs many former USPS workers to advise and consult. These people are paid well to help Netflix remove "problems" from the processing system. Netflix also operates its own fleet of trucks who go to the main post office branches in most areas and pickup the Netflix mailers so the USPS only has to do minimal work. Literally all they do is collect the mailers and Netflix does the rest. Anything that takes the load off USPS workers, anything that makes their lives easier, they like. They remember. This also increases profits for the PS because they still get paid the same price per mailpiece even if Netflix is picking up the mailers halfway through the processing.

Gamefly is not doing these things. Gamefly does not send out trucks to all the major mail processing centers because Gamefly doesn't have facilities all over the US like Netflix. Gamefly is apparently not employing USPS workers to assists and advise and easy processing, for whatever reason. Instead of doing those things, Gamefly simply wants "fair treatment" without understanding you don't get that for free with the USPS. There needs to be some "appreciation" of the hard work and effort being made by the USPS.

One other thing you never do is piss off the USPS. If you do that, if you cause them to have to work harder, and you are a big mailer like this, bad things start happening to your mail.

So let me sum up. To get the best experience out of the USPS, GameFly should:

1. Do as much of the work themselves as they can.2. Appreciate the hard work and effort of the remainder of the work the USPS does.3. Don't piss off the USPS because if they do, "bad things" will happen.

Why doesn't Gamefly insure their titles? I mean, if they lose $295,000 in replacement fees a month, would it not make some economical sense to insure every disc? I don't know how much insurance is exactly, but IIRC it'd be less than $1.

That way, they put most of the financial burden on the USPS, who would feel enough pain to actually improve their handling of product. What a concept!

Originally posted by bryansj:I doubt Gamefly pays $50 to $60 per game. I would assume they would get them at least at reseller cost.

Actually the cost is more for Rental outlets. The cost for games and movies have a markup when sold to Rental outlets. The studios perception is that they are not making the same profit as unit sold to units viewed. I have seen movies cost $99 depending on how much rental revenue is projected by the studios. Average price is around $60 for a movie to rent. These outlets are also prevented from buying retail, so they can't go out and pay $19 for a movie or $60 for a video game.

@Brad Oliver. Seriously. If the USPS starts spitting in their game discs because GameFly got on their case for not doing their job, then that is USPS's problem, and they should be taken to task for it.

Chicago is notorious for its sketchy USPS service, and I don't think Netflix is getting much of a preferential treatment here. I've gotten two broken DVDs in the last year, which is the same amount I'd gotten the 5 years previous from Netflix. Also, the envelopes often arrive ripped to the point they can't be used for return shipment.

odd.

here (louisville, ky) all my netflix/gamefly stuff has been fine. now the discs may be eaten to hell and back, but the actual package is fine.

there's shitty employees everywhere. i don't know if i'd put all the blame on the USPS. i wouldn't blame all of McDonalds for a shitty fry cook, just that local site.

That might have something to do with the fact that your Netflix titles are shipped from basically the same city?

I haven't had any broken discs from Gamefly or Netflix. What I have noticed is that even though both Netflix and Gamefly have distribution centers less than 50 miles from where I live, Gamefly's games take significantly longer to reach me and also to be returned. It's not uncommon for me to order up a Netflix movie and have it here the next day. With Gamefly it could take as much as a week. That does seem a bit preferential, especially if Gamefly is paying significantly more to ship their games than Netflix or Blockbuster while the later two receive better shipping times and lower instances of loss.

I think Netflix gets preferential treatment simply because they ship so many discs. It's relatively easy to grab the whole stack of discs out of the mail stream and put them through the more gentle processor. If there are only a few Gamefly envelopes in the same mail stream then those won't necessarily be picked out. The USPS has done a lot in working with Netflix to bring down their per disc cost, it sounds like they need to do a bit more. Any changes they make to benefit Gamefly would probably help reduce other breakage as well.

Originally posted by bryansj:I doubt Gamefly pays $50 to $60 per game. I would assume they would get them at least at reseller cost.

Actually the cost is more for Rental outlets. The cost for games and movies have a markup when sold to Rental outlets. The studios perception is that they are not making the same profit as unit sold to units viewed. I have seen movies cost $99 depending on how much rental revenue is projected by the studios. Average price is around $60 for a movie to rent. These outlets are also prevented from buying retail, so they can't go out and pay $19 for a movie or $60 for a video game.

Do game rentals work like movie rentals though? Movie rentals on VHS were originally super-expensive, >$100. (Weren't some VHS movies only available for rental for a while?) Anyway, for a while now there's been revenue-sharing agreements between the studios and rental chains where they just pay a token amount for the DVD and give a cut of every rental to the relevant studio.

Rentrak, for example, has a system for video games but I think that's designed around the traditional retail rental model.